FinCEN Expands, Extends Order to Identify Money-laundering Schemes

August 2, 2016

The Financial Crimes Enforcement Network (FinCEN) on July 27 announced new Geographic Targeting Orders temporarily requiring all U.S. title insurance companies to identify the individuals behind companies used to conduct high-end, all-cash real estate transactions in six major jurisdictions.

In January, FinCEN ordered two GTOs requiring certain underwriters to identify and report the true “beneficial owner” behind a legal entity involved in certain high-end deals in Manhattan and Miami-Dade County.

“As an independent party at the closing table for millions of real estate transactions each year, ALTA members take their responsibility seriously,” said Michelle Korsmo, ALTA’s chief executive officer. “Once again, we are ensuring our members have the tools and information they need to properly comply with FinCEN’s reporting requirements. We appreciate FinCEN’s efforts to prevent money laundering schemes and the illegal purchase of real estate.”

FinCEN said title insurance companies play a central role in real estate transactions and can provide the regulator with valuable information. The GTOs do not imply any derogatory finding by FinCEN with respect to the covered companies. 

“To the contrary, FinCEN appreciates the continued assistance and cooperation of the title insurance companies and the American Land Title Association in protecting the real estate markets from abuse by illicit actors,” FinCEN said.

The GTOs are effective for 180 days beginning on Aug. 28 and apply to underwriters’ subsidiaries and agents. FinCEN may indefinitely renew the orders for another six months and for additional areas.

The new GTOs include these areas and price thresholds:

  • Borough of Manhattan, N.Y.; $3 million
  • Borough of Brooklyn, Queens and Bronx, N.Y.; $1.5 million
  • Miami-Dade, Broward and Palm Beach counties, Florida; $1 million 
  • Los Angeles, San Francisco, San Mateo, Santa Clara and San Diego counties, California; $2 million
  • Bexar County, Texas (San Antonio); $500,000 

A currency transaction report must be filed with FinCEN if these things occur:

  • Location (deal occurs in one of the areas included in the GTOs)
  • All-cash deal (no financing)
  • Purchase price exceeds threshold determined for each jurisdiction (see below)
  • There’s a corporate buyer
  • Purchase price paid via monetary instrument

The report must include:

  • Information about the identity of the individual primarily responsible for representing the buyer. The title company must obtain a record of the individual’s driver’s license, passport of other similar identification
  • Date of closing of the covered transaction
  • Total amount transferred in the form of a monetary instrument
  • Total purchase price of the covered transaction
  • Address of real property involved

If the purchase involved in the covered transaction is a limited liability company, the underwriter must provide the name, address and taxpayer identification number of all its members. Additionally, covered title companies must retain all records relating to compliance with the order for five years, store the records so they are accessible with a reasonable period of time and make the data available to FinCEN or other law enforcement or regulatory agency, upon request.

According to FinCEN, the initial GTOs are helping law enforcement identify possible illicit activity and informing future regulatory approaches. In particular, a significant portion of covered transactions have indicated possible criminal activity associated with the individuals reported to be the beneficial owners behind shell company purchasers. FinCEN said this corroborates concerns that the transactions covered by the GTOs (i.e., all-cash luxury purchases of residential property by a legal entity) are highly vulnerable to abuse for money laundering. Federal and state law enforcement agencies have also informed FinCEN that information generated by the GTOs has provided greater insight on potential assets held by persons of investigative interest and, in some cases, has helped generate leads and identify previously unknown subjects.

“The information we have obtained from our initial GTOs suggests that we are on the right track,” said FinCEN Acting Director Jamal El-Hindi. “By expanding the GTOs to other major cities, we will learn even more about the money laundering risks in the national real estate markets, helping us determine our future regulatory course.”

 

 


Contact ALTA at 202-296-3671 or communications@alta.org.

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